Home builders are trying every gimmick just to attract buyers.
What does it take to make a sale in the midst of a recessionary economy? Believe it or not, developers are taking every marketing tactic just to close a deal. That’s how worse the housing market is. Imagine getting an income insurance in case the homebuyer suddenly losses his job while he’s not yet done with the mortgage. How about 3 months of free rent in your new apartment? Buyers and renters seem to be enjoying the perks these days and some are even getting hardwood floors for free.
But do these schemes actually work and reinvigorate their sales figures?
The National Association of Home Builders found out that new home sales increased by 4.7 percent nationally because of these perks. These marketing gimmicks indeed work but there are two factors that can tame down this growth if the industry fails to address these issues.
First, discounting their offers may have appealed to a greater number of buyers when national consumer confidence is at its lowest. However, we doubt if this can be sustained in the long run. For example, RDC Developers in Pennsylvania can purchase mortgage rate for new home buyers of speculative homes for up to 12 or 24 months. In two years, the market may actually turn more sour and they’d be facing fewer sales. As Susan Gunelius of MarketingBlurb.com states, “Set prices that you’re able to create a perceived equity value for. In other words, you need to be able to convince customers that they’re getting enough value for their money spent.”
Second, when the market becomes too much saturated by companies offering these freebies, buyers may end up having decreased motivation to make a choice. In 2000, Sheena Iyengar and Mark Lepper found out in their study that participants who were given a large number of options were less induced to make a choice. Participants became frustrated in making the
decision and less satisfaction was highly observed. It wouldn’t be difficult to expect the hyperchoice effect to take place in the housing market especially when payments are spread on 15 or 30 years.
In the end, buyers benefit more with these schemes.